Valuation / Loan Security Valuation (Submission)

Question 1

Why did you use the upper quartile BCIS costs for your Mole Hill Green valuation and how did this compare to the Borrower’s costs?

Answer 1

The scheme was a small and exclusive development and was proposed to be finished to a high specification, targeting the higher end of the market.

Borrowers costs = £160 psf
BCIS = £200 psf

I felt it was realistic to accept the Borrower’s figures due to their experience and benefits from economies of scale. ALbeit I advised my client that costings should be confirmed by an independent quantity surveyor.

Question 2

Can you tell me what the MV and GDV were for the valuation in Molehill Green, please?

Answer 2

Market Value = £765,000
GDV = £2,450,000 (£373 psf)

MV = approximately 32% of GDV

Question 3

What price per plot/ price per acre would you expect to see in this area (Molehill Green)?

Answer 3

This was entirely private, larger plots and units = higher than the average.

The average private plot could be £150,000 - £250,000. From experience on a larger scheme close by in Bishops Stortford it was approx £200,000 private plot and £110,000 blended.

Question 4

Do you tend to see similar restrictions/ issues in the PD comparable evidence in the area too?

Answer 4

it is common that PD schemes do tend to be more restrictive in terms of layout but this can certainly be better or worse than comparable schemes. In this instance, the comparable scheme was not as restricted and the subject was inferior in comparison.

Question 5

What is material uncertainty and where would you go for guidance on it?

Answer 5

VPGA 10 in the Red Book Global.

Market uncertainty could be due to unprecedented circumstances whereby there is a heightened potential for volatility in the property market. The presence of material uncertainty would usually advise my client that the valuation is closely monitored and that the valuation is as of the date of valuation.

Question 6

Can you give me a non-economic material uncertainty clause?

Answer 6

Lack of information or unique property.

Question 7

Does material uncertainty mean having less confidence in a valuation?

Answer 7

Yes, less certainty can be attached to the valuation than would otherwise be the case. Material uncertainty may arise in various circumstances but a valuer could be faced with an unprecedented set of circumstances on which to base a judgement. Valuers should still be able to make a judgement, but it is important that the context of the judgement is clearly expressed.

Question 8

What are the 5 methods of valuation?

Answer 8

1. Comparable
2. Residual
3. Investment
4. Profits
5. Depreciated Replacement Cost

Question 9

What is your company’s liability cap and PII?

Answer 9

Complying with the obligations under the RICS Rules of Conduct, based on my firm’s turnover which is above £200,001 we have a minimum level of indemnity on each claim of £1,000,000. Our policy is fully retroactive and offers cover for a period of 6 years after the valuation was undertaken.

My company have a limitation of liability up to 33% of the value of the Property or £75m (the lower of the two).

Question 10

What was the purpose of your residential valuation in Chelmsford?

Answer 10

The valuation was for loan security purposes.

Question 11

What was the £psf of the comparable evidence looked at in Chelmsford and what value did you apply?

Answer 11

Approximately £600-£640 psf for studio/1 bedroom flats. I applied a sales rate towards the lower end of this albeit the subject units were slightly smaller than the market evidence, there were inferior in terms of space usage and lack of parking.

Question 12

Is VPGA 10 mandatory?

Answer 12

No this is found in Part 5 of the RBG. Whilst it is not mandatory it is global practice guidance.

VPGA = Valuation Practice Guidance Application

Question 13

What section of the RBG is VPGA?

Answer 13

Part 5 - Valuation Practice Guidance Application

Question 14

Did the material uncertainty clause in your Brentwood office valuation have an impact on the value of your property?

Answer 14

Whilst it did not impact upon the value of the Property itself the Material Uncertainty clause was to reflect the reduced certainty and a higher degree of caution attached to the valuation and to highlight the importance of the valuation date.

Question 15

What is a SWOT analysis/ what is included?

Answer 15

The framework used to identify the relevant Strengths, Weaknesses, Opportunities, and Threats.

Question 16

Can you give me some examples of the threats and weaknesses included in your SWOT analysis in Brentwood?

Answer 16

Strength - Freehold, Specification and car parking.
Opportunities - Residential conversion potential.

Weaknesses - Location will deter some office occupiers
Threats - Continued market uncertainty due to the Covid-19 pandemic.

Question 17

What are the sections in the Red Book?

Answer 17

Part 1 - Intorduation
Part 2 - Glossary
Part 3 - Professional Standards (PS 1&2)
Part 4 - Valuation of technical and performance standards (VPS 1-5)
Part 5 - Valuation Applications (VPGA 1-10)
Part 6 - International Valuation Standards

Question 18

(LSV) What was the D&B score for the property in Chelmsford?

Answer 18

three floors:
1st floor FULLY LET to AIM Apprenticeships Ltd.
2nd floor VACANT
3rd floor PART LET to Protocol Teachers
3rd floor PART VACANT

(Protocol) 5A 2 = Tangible net worth above £35m & low risk (
(AIM Apprenticeships Ltd.) C 1 = Tangible net worth £100k - £199,999 & minimal risk

Question 19

(LSV) Can you tell me how the D&B score impacted the yield that you adopted for your office valuation in Chelmsford?

Answer 19

Overall all tenants reflected a low-moderate risk, therefore I applied a lower risk yield of 7%, in the instance of vacant possession I would have applied a higher yield to reflect the risk of around 7.5%.

Question 20

(LSV) In terms of the Chelmsford office investment market, what yield would you expect to see?

Answer 20

7-10%

Accounting for tenant covenant strength or occupational status.

Question 21

(LSV) Can you tell me what the basic terms of the leases were for the tenants of the Chelmsford property?

Answer 21

three floors:
1st floor FULLY LET to AIM Apprenticeships Ltd. = 3yr lease (1 yr remaining), no break clauses, rent-free period or rent reviews - £45,400 p/a
2nd floor VACANT
3rd floor PART LET to Protocol Teachers. = 5yr lease (3 yr remaining), no break clauses, rent-free period or rent reviews - £20,800 p/a
3rd floor PART VACANT

Question 22

(LSV) How could lease terms impact the yield applied for an investment valuation?

Answer 22

guarantors
rental value
inside the 1954 Act = the tenant has the right to renew the lease. (just commercial) and has more security so would usually be willing to pay more.
Break clauses but whoever has the right to break is important.

Question 23

(LSV) In regards to your valuation in Wickham Bishops, you stated that there were strong market conditions, how so and what evidence reflected this?

Answer 23

I undertook this valuation at the end of 2020 in the midst of the pandemic. The prime residential sales were booming, particularly in the eastern region where we saw a large number of young families moving out of London, prioritising space and their way of life.

Question 24

(LSV) Are you aware of what the loan terms were for the property in Wickam Bishops?

Answer 24

It was an interest-only fixed loan of approximately £500,000.

Question 25

(LSV) What was contained within the bank instruction for Wickham Bishops?

Answer 25

What 2 main pieces of info does VPGA 2 advice the valuer to request off the lender?

Question 26

(LSV) For your investment valuation in Colchester, what type of investment method did you use?

Answer 26

I used the conventional method of valuation and the hardcore method due to one tenant being rack-rented and the other over-rented.

Question 27

When might you use T&R or Hardcore methods of investment valuation?

Answer 27

Term and Reversion when a property is under-rented. Hardcore when a property is over-rented. Rack-rented (conventional method)

Question 28

(LSV) In regards to the passing rents in your Chelmsford office valuation, were they over, under or rack-rented?

Answer 28

There were two existing tenants who were paying £18psf and £17psf. The MR was estimated to be £17psf and therefore one tenant was marginally over-rented.

Question 29

(LSV) Did you account for any voids or rent-free periods within your investment valuation in Chelmsford?

Answer 29

I allowed for void periods and rent-free periods on re-letting, assuming the units would be re-let to tenants of a similar covenant. (This was accounted for within my ALL RISK YEILD that I applied when capitalizing the units)

Question 30

Please can you explain why COVID-19 was necessary as a material uncertainty?

Answer 30

In this instance, as at the valuation date I was faced with an unprecedented set of circumstances caused by COVID-19 and the various measures taken to tackle this unforeseen global pandemic. This results in the absence of relevant/sufficient market evidence on which to base my judgement. Therefore the material uncertainty clause is to ensure transparency to provide insight into the market context in which my judgement was made.

Question 31

Are there any material uncertainty clauses you would include in a report today? ***

Answer 31

Regarding the invasion of Ukraine by the Russian military in late February 2022, there was an immediate impact on the global economy due, in part, to sanctions imposed on Russia, rising oil and gas prices and the restriction of exported goods from Ukraine and Russia. Whilst the residential property markets continue to perform well, valuations would be prepared against the backdrop of a very challenging economic outlook.

Question 32

(LSV) In terms of your Chelmsford office valuation, if some/ all of the units were vacant would you have varied the yield and why?

Answer 32

Yes, if the units were vacant I would have likely applied a higher yield (say 10%) to reflect the higher risk associated.

Question 33

(LSV) In regard to the investment valuations you have undertaken, do you tend to see a variance in Market Value in regards to VP and a fully let Property?

Answer 33

Yes, we would usually expect a 5-10% reflection in the discount for VP Properties due to the higher perceived risk.

Question 34

How would you account for void-free periods and rent-free periods on re-letting, assuming the units would be re-let to tenants of a similar covenant strength?

Answer 34

It is accounted for within the cash flow, void periods and rent free periods would be accounted for by deferring the rental income of the property.

Question 35

What is Market Value?

Answer 35

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

Question 36

What is Market Rent?

Answer 36

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

Question 37

What is an Investment Value?

Answer 37

The value of an asset to the owner or a prospective owner for individual investment or operational objectives.

Question 38

What is Fair View?

Answer 38

Fair value is used for financial reporting. IFRS (Global Red Book definition) = 'The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.' UK GAAP, FRS 102 (UK Supplement (2019) definition) = ' the amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm’s length transaction’

Question 39

Special assumption examples?

Answer 39

GDV Planning Consent Loan security could be restricted marketing period.

Question 40

What sort of value do you presume for a quick sale period?

Answer 40

3 months of marketing could be up to 25%-50% discount but it depends on the property, market and complexity of the property.

Question 41

How many bases of value?

Answer 41

(4) MV MR IV FV

Question 42

Who do you undertrake COI on?

Answer 42

Borrower Client property connected parties

Question 43

Is there any incidence where you would increase your PII?

Answer 43

Subject to confirmation from my 'company Best Practice team' (Group Legal) to increase above 33%. This could be if they ask for the report to be increased to more than one or two addresses. We do not value for peer-peer lenders because of the number of people likely to rely on the report.

Question 44

Gross yield?

Answer 44

This is the yield which encompasses fees (stamp duty, agents fee 5.76%). It may be used to assess the relative returns on assets.

Question 45

Net yield?

Answer 45

this is the yield of the asset once you have removed the associated costs. This is the 'real' return to the investor.

Question 46

What 2 main pieces of info does VPGA 2 advice the valuer to request off the lender?

Answer 46

1. previous recent sales price if applicable 2. loan terms

Question 47

What is the effective date of the Global Standards?

Answer 47

January 2022

Question 48

Are there any other standards to be aware of when valuing Property?

Answer 48

Red Book UK Supplement. (due to be updated in 2023) Guidance Note: Valuation of Development Property (2019) Guidance Note: Comparable Evidence in Real Estate Valuation (2019) Guidance Note: Valuation of Individual New Build Homes (2019)

Question 49

If you were doing a valuaiton for tax purposes in the UK, are there any additional considerations to be had in relation to the MV definition?

Answer 49

- Consideration of the most viable lotting of property - Consideration of any significant date? ie. inheritance tax.

Question 50

Is reinstatement cost a suitable basis for loan security?

Answer 50

No. Benchamark for bank

Question 51

Of the 5 methods of valaution, which would you not use for loan security?

Answer 51

1. Residual 2. Comparable 3. Investment 4. Profits 5. Depreciated Replacement Cost = not suitable for loan security

Question 52

The RICS commissioned a review of real estate investment valuations which was published in February 2022 and gave 13 recommendations - can you give me two of these?

Answer 52

Longstanding concern that valuers are not. One of the thoughts was to move to DCF but we don't have the data to do this. 1. Creation of an indepently led valuation regulatory Quality Assurance Pannel under the RICS standards and regulatory board. 2. Formal role for a valuation compliance officer in firms offering regulated valuation services. 3.need for further specific RICS guidance to clarify their expectations around the cultures and behaviours ecpected by valuers.

Question 53

If you were valuing a property for tax purposes, which part of the Red Book would you have regard to?

Answer 53

VPGA 1 - Valuation for inclusion in financial statements 

Question 54

What is the difference between gross and net yield?

Answer 54

Gross yield is the property's annual income before taxes or expenses have been removed. Net = the investors 'real' income

Question 55

What is the heirachy of evidence?

Answer 55

As identified in the 'Comparable Evidence in Real Estate Valuation (2019)' A = Direct comparables B = wider market comparables C = other

Question 56

What do you mean by a desktop valuation and who was your client for the job in Epping?

Answer 56

This in non-reliance basis and the client was a property owner who simply wanted an understanding of the value of his property.

Question 57

If you had an investment comparable that was clearly over-rented how would you calculate the equivalent yield? and why would it be necessary to do this rather than apply an initial yield?

Answer 57

You cannot compare a rack-rented property with an under or over-rented one in terms of the initial yield – if under rented the yield will be low and vice versa if over-rented. An equivalent yield reflects the under / over-rented nature of the comparable and can then be more effectively compared with a rack-rented yield.

Question 58

When you valued the office in Brentwood, was it tenanted or owner-occupied?

Answer 58

owner-occupied and therefore I valued the office building on the special assumption of Vacant Possession.

Question 59

What was the rental tone of the office in Brentwood? and what was the yeild basis used/ the impact of lease terms?

Answer 59

The property was owner-occupied so I valued the MV on the special assumption of vacant possession by looking at comparable evidence and applying a £psf to assess the MV.

Question 60

What impact do you consider the pandemic has had on the office sector?

Question 61

You refer to the use of BCIS in your Mole Hill Green valuation, what does this include? Garages? Plot costs? Adjustments made?

Answer 61

Prelims, substructure and superstructure

Question 62

Can you give four reasons you wouldn't use the Red Book?

Answer 62

1. Providing agency or brokerage service. 2. Acting as an expert witness. 3. Providing valuations to a client for purely internal purposes. 4. Performing statutory functions.

Question 63

When is an asset not suitable for loan security purposes?

Answer 63

You might advise your client with concerns such as - High-risk flood zone - structural concerns - if you feel like the borrower isn't knowledgeable in the field of work - Fire safety (serious remediation is required or doesn't have an EWS1 form)

Question 64

When would you use a DRC method of valuation?

Answer 64

Used when there is not an active market for the asset being valued. There is no useful or relevant evidence of recent sales transactions due to the specialised nature of the asset. Commonly relates to Properties whose valued are based on plant material which depreciates and will need to be replaced and this is all encountered in the value of the property.

Question 65

Please can define a yield?

Answer 65

The measure of invested return is measured as a percentage.

Question 66

When might you use DCF?

Answer 66

The UK does not use DCF, it was one of the discussions in the investigation into Investment Valuation which cropped up but this has been dismissed due to the lack of information available to be able to put it into practice.

Question 67

What type of properties would you use the profits methods?

Answer 67

Trade-related properties.

Question 68

What is the difference between senior debt and mezzanine?

Answer 68

The senior debt is secured against property. Mezzanine not secured

Question 69

What is an overage?

Answer 69

Agreement between the landowner and purchaser which agrees on a shared profit over and above the agreed sale price.

Question 70

How would you undertake Depreciated Replacement Cost valuation?

Answer 70

Value of the land existing use Value of the existing units (which are crucial for the worth of the property) minus a discount for depreciation

Question 71

What is marriage value?

Answer 71

Value of a merger of value. physical or tenurial.

Question 72

How would you assess the marriage?

Answer 72

value individually and then value together. The marriage value is the added value.

Question 73

What is hope value?

Answer 73

Value arising from the expectation of an increase in the value of a property.

Question 74

What if you want to go above the liability cap of Savills?

Answer 74

Must be agreed with Group Legal before instruction.

Question 75

why don't we offer 100% liability cover?

Answer 75

Lenders do not lend 100% so we don't need to offer 100%.

Question 76

What was the investigation into Investment Valuation by the RICS which was published in February 2022?

Answer 76

It was an independent valuation to ensure robust practice and sustain confident markets. Peter Pereira-Gray made 13 recommendations which the Standards and Regulation Board (SRB) have accepted. Looked at 4 key areas: 1. Valuation methodology 2. Property risk analysis 3. Independence and objectivity 4. Measuring market confidence in valuer performance Robust, relevant and trusted.

Question 77

In your inspection of an East London Portfolio, how would you have amended your valuation if the Property was determined to be structurally unsound?

Answer 77

NIL value for that property? Advised my client that it wouldn't be suitable for loan security purposes? Remove it from the wider portfolio valuation? Lender would have likely reduced their loan offering?

Question 78

You mentioned that you included a caveat within your report regarding the structural integrity of a building in regard to your East London Portfolio. Would valuing on a special assumption have been necessary?

Answer 78

Yes, once I informed my client they requested that I report the value on the special assumption that there were no defects. Albeit including the caveat also.

Question 79

Can you tell me about the Landlord and Tenant Act (1954) and what it means to be inside or outside of it?

Answer 79

Where the lease is protected by the Landlord and Tenant Act 1954 (which is the case for the lease of the property) then the tenant has the right to remain in occupation under the terms of the existing lease on the expiry of the contractual term. The landlord is entitled to collect the rent and other payments due and both parties continue to be bound by the terms of the lease. Once the contractual term has ended, then the tenant can terminate the lease at any time by giving no less than 3 months’ written notice to the landlord.

Question 80

What was the overall floorspace of the offices in Chelmsford and was it a freehold?

Answer 80

Yes it was freehold and there was approximately 7,200 sqft of office space (each floor approximately 2,400 sqft).

Question 81

What yields did you capitalise/ apply when valuing the offices in Chelmsford and what investment method did you use?

Answer 81

One of the existing tenants they were marginally overrented (MV +£18psf and Passing rent was £19psf albeit there was only one year left on the lease terms) I applied a higher yield (8%) to reflect this risk of rental default, especially in the market where MR was likely to decrease further as a result of the pandemic. The other tenanted property was rack rented so I used the conventional method along with the two vacant units too. I applied a suitable all risks yield (7.5%) to capitalize into perpetuity.

Question 82

What was the specification of the offices in Colchester?

Answer 82

The specification is high including wall and mounted reverse cycle heating/cooling units, carpeted floors, plastered and painted wall finishes with some exposed brickwork, solid oak doors, glazed demountable partitions, recessed spot lights, window blinds and security alarm system.

Question 83

What was the specification of the offices in Chelmsford?

Answer 83

The space had been refurbished including all common areas and WCs on each floor, to provide modern open-plan office accommodation benefitting from carpets, suspended lighting, and perimeter trunking.

Question 84

What is permitted development?

Answer 84

It is a type of development that does not require full planning permission.

Question 85

What is the expected 'slower' sales rate of the Chelmsford PD scheme which you reported to your client? How many units were there?

Answer 85

22 units and I advised a slower sales rate and I would expect this to be from 1-2 units per month

Question 86

Are most office leases FRI?

Answer 86

Yes, it is common to expect FRI leases however it is usually an effective FRI which means the landlord insures the property and recovers the costs back from the tenant. In regards to repairs, they usually state that it must be in a good and substantial state of repair at the end of the lease albeit it can be required to be above and beyond this but that depends upon the terms of the lease.

Question 87

Was Rosebery House freehold or long leasehold?

Answer 87

It was a freehold which is a strength of the Property due to it being more desirable than a long leasehold due to its infinite nature.

Question 88

What is a freehold?

Answer 88

This is the nearest to absolute ownership of land and buildings that is possible in English Law. True absolute ownership of landed property is not possible, as in theory, the Sovereign retains these rights over all land in the country. A Freehold 'tenancy' is acquired (legally termed fee simple absolute). A freeholder has the right to retain possession of the property in perpetuity.

Question 89

Please can you talk me through how you would go about undertaking a profit method of valulation?

Answer 89

The profits method is used to value trade-related assets and the principle of the profits method is that the VALUE OF THE PROPERTY DEPENDS ON THE PROFIT GENERATED FROM A BUSINESS, not the physical building or location. I would asses accurate and audited accounts if possible for the last 3 years. (audited accounts are superior to management accounts). If it was a new business you would use an estimated business plan. SIMPLE METHODOLOGY: 1. Annual turnover - (costs/purchases ) - (reasonable working expenses) - (operators remuneration) = Fair Maintainable Operating Profit (FMOP) 2. Capitalise at an appropriate yield (YP multiplier) to provide MV# 3. Cross-check with comparable sales evidence if possible.

Question 90

Please can you talk me through how you would go about undertaking DRC method of valuation?

Answer 90

I haven't had any experience with this method of valuation but I am aware it is only used in circumstances where direct market evidence is limited or unavailable for specialised properties. FOR EXAMPLE - lighthouses, power stations, sewage works, or oil refineries. It is not suitable for loan security purposes. It is for ACCOUNTS PURPOSES or RATING VALUATIONS of specialist properties. SIMPLE METHODOLOGY: 1. Value of the land in its existing use (assuming planning permission exists) 2. Add (current costs of replacing the building + fees) - (a discount for depreciation and obsolescence/deterioration obtained from BCIS and then a judgment made on the level of obsolescence) I would refer to the RICS Guidance Note on 'DRC method of valuation for financial reporting' (2018).

Question 91

What is a yield?

Answer 91

It is a measure of investment return, expressed as a percentage of capital invested.

Question 92

What are the types of obsolescence to consider in regard to the DRC method of valuation?

Answer 92

Physical (the result of wear and tear over time) Functional (design and specification of an asset no longer fulfills the function for what it was originally designed) Economic (changing market conditions for the use of the asset)

Question 93

What is the IVS?

Answer 93

It is mandatory section of the Red Book Global and it gives details about the methods of valution.

Question 94

How would your advice have changed for Wickham Bishops if your client asked you to value the special assumption of a restricted marketing period?

Answer 94

a restricted 3-month marketing period could have seen anywhere from a 25%-50% reduction in market value.

Question 95

What are common Special Assumptions requests from banks?

Answer 95

VP Restricted Market

Question 96

What are the differences between loan security terms of engagement and non-loan security?

Answer 96

Confirm no involvement within the last 24 months VPGA 2 and confirm any future prospect of involvement. Borrower details.

Question 97

When did you need an EWS1 form? What documents would you refer to for assistance?

Answer 97

A valuer should always have a rationale to justify the request for an EWS1 form: 1) 6-storey buildings with cladding or vertically stacked balconies. 2) 5-6 storey buildings with more than 1/4 cladding or vertically stacked balconies 3) 4 storeys or less with ACM, MCM or HPL panels. (these can look like metal so this should be clarified)

Question 98

If you value a building after 2018 would they need an EWS1 form?

Answer 98

Check the Guidance note (2021)!!!

Question 99

What is an acceptable allowance in regard to the valuation (margins of error)?

Answer 99

Case law refers to a margin between 10%-15% depending on the facts. Singer and Friedlander v John D Wood & Co (1977) state that the margin of error can be 10% on either side of a figure that can be said to be the right figure that a competent, careful, and experienced valuer arrives at after making all the necessary inquiries and paying property regard to the state of the market. In exceptional circumstances, the permissible margin could be extended to about 15% or a little more either way.

Question 100

Why might a borrower want to refinance?

Answer 100

Because of changes or better finance rates available or they are wanting to re-leverage against their property to pull cash out for example if they believe it has gone up in value.

Question 101

Types of fraud?

Answer 101

Income fraud Planning permission fraud identity fraud

Question 102

What types of tenure or property would you expect a lender not to lend on?

Answer 102

Short leases less than 80 years Non-traditional housing types - pre fab Restrictive covenants

Question 103

In regard to your PD scheme in Chelmsford can you talk me through some of the recent changes to PD?

Question 104

What were the changes to Use Classes in 2020 and why?

Answer 104

The creation of a new learning and non-residential institutions class – Class F1 – and a new commercial, business, and service class – Class E. This simplification of use classes is arguably one of the first government attempts to modernise the planning system to better respond to the current socio-economic challenges, which have been exacerbated by the Covid pandemic and it provides more flexibility for both landlords and tenants, helping reduce vacancy rates in our towns.

Question 105

What were the main changes to the Red Book (2021)?

Answer 105

1. The need for adequate terms of reference in reports if the valuations are RBG compliant or not ("non-Red Book" or "partial" are not to be used). 2. Definitions added regarding ESG and Sustainability. (Part 2 - glossary). 3. ESG and sustainability factors should form an integral part of the Valuation approach and reasoning. Collection of appropriate data will become necessary. 4. In regards to loans security purposes there should be commentary in regards to the maintainability of income and future cost liabilities to meet changing regulations and investor expectations (ESG and Sustainabilty).

Question 106

What is the profits method?